Entertainment: HMV Launches Online Service

HMV launches digital on demand to combat falling profits

HMV launches digital on demand to combat falling profits

In order to boost profits for its failing physical stores, HMV has announced its intent to launch an online film rental service.

The entertainment retailer, which has been hard-hit as consumers keep a strict eye on their budgets, will be going up against fierce competition. LoveFilm poses a threat, as well as American film renters Netflix, which is set to launch in the UK.

Digital revolution

The move will be the first major change undertaken by the new HMV director of ecommerce and marketing, Mark Hodkinson.

Analysts say the launch of a new online service shows just how much business traditional media outlets are losing to digital rivals. Ease of access has become paramount for consumers, especially in light of the new necessity-turned-trend of staying in for dinner and a movie.

The selection that online and digital retailers can offer has far outweighed the comfort of brick and mortar stores for most consumers, as HMV understands. Its revenues have been on a steady decline as digital rivals take home the lion’s share of the personal home viewing market.

Hodkinson said that “the time is right” include cyberspace to their lineup of locations in light of the growing number of consumers who are spurring profits in the video on demand industry.

Profits plummet

The move is a well timed effort to pull HMV out of a sharp decline, as its last year of full set results showed a decline in pre-tax profits from £67.3 million to £2.6 million. Pressure from online retailing giants like Amazon, which has also launched a digital on demand service, and iTunes, have pushed like-for-like revenues down 10%.

Though the service will be available immediately, HMV says it does not plan to heavily market the product until after the Christmas rush gift purchasing.

This may be a critical mistake, as families are often more apt to buy 6 month or year long subscriptions as gifts that will make everyone in the household happy. However, the trend of purchasing digital subscriptions may not hold for HMV, which does not have time to make its on demand service a household name before the holidays.

The media retailer said that it will first target the two million members who are part of its loyalty card programme before opening the service more widely through aggressive advertising.

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